Pot prices double as Colorado retailers roll out green carpet

By Alison Vekshin, Bloomberg News

Posted:
01/09/2014 08:43:52 AM MST

Marijuana prices are rising in Colorado. (The Denver Post)

SAN FRANCISCO — At Medicine Man Denver, a shop in Colorado's capital that began selling marijuana for recreational use last week, people waited in line to get their first taste of legal weed. Some shouted “Freedom!” to the cheering crowd as they walked out with bags of dope. They also paid about double the cost of medical marijuana.

Customers were charged $45 for an eighth of an ounce of recreational pot, compared with $25 for an identical amount that he sells for medical purposes, said Andy Williams, the president and chief executive officer.

“They're not used to coming into a facility and paying $25 an eighth, so when they come in, it's just whatever the price is,” Williams, 45, said by telephone. “Having the ability to buy safe, reliable, quality marijuana in an environment that's fun and exciting sure beats going in a back alley and saying, 'Hey buddy, you got a bag?'”

The retail price of marijuana in Colorado has doubled since Jan. 1, when the state became the first to legalize sales to anyone 21 and older. Pot for recreational use sells for an average of $400 an ounce, compared with $200 an ounce that Colorado retailers collect for medical marijuana, said Aaron Smith, executive director of the National Cannabis Industry Association, a Washington-based trade group.

Advertisement

“That's just supply and demand,” Smith said. “As more businesses open and the businesses get a sense of what the demand is and are able to meet it, the prices will go back down.”

About 21 percent in state and local taxes is charged on the sale of recreational dope, said Amber Miller, a spokeswoman for the City and County of Denver.

Colorado voters approved a ballot measure in November 2012 to decriminalize the drug in defiance of federal law, which still classifies marijuana as an illegal substance. A similar measure was approved in Washington state, where shops are set to open later this year.

The changes come as marijuana use is being redefined in the United States. Twenty states and the District of Columbia have legalized medical marijuana use, and New York Gov. Andrew Cuomo is planning to revive a 1980 law to allow some hospitals to make use of the drug for patients with cancer, glaucoma and other illnesses.

Shop owners in the Denver area say they've raised prices in response to the high demand as consumers formed lines around the block to buy the drug legally.

Bud Med, a shop in the Denver suburb of Edgewater, rolled out a green carpet for consumers waiting in the snow on the first day of sales, said Brooke Gehring, 33, owner of Patients Choice of Colorado, which has four shops including Bud Med. Customers asked for their receipts with the Jan. 1, 2014, date to keep as a memento, she said.

“Everyone was excited to be a part of history and to be able to make their first legal marijuana purchase,” Gehring said.

At Bud Med, an eighth of an ounce of recreational marijuana was going for about $55, compared with about $25 for medical marijuana, she said.

“It is very comparable to what black market prices are,” Gehring said.

She said her business costs have increased because of licensing, meeting compliance requirements and additional staff. Higher prices also help keep her from running out of inventory, she said.

“We probably won't truly understand what that demand is for another three to six months, when more shops are open across the state, to see if this will be a steady crowd,” Gehring said. “It's always easier to lower our prices than to raise our prices.”

Licenses for 136 marijuana stores, a majority in Denver, were mailed Dec. 23, the state Revenue Department said in a statement. Recreational marijuana businesses can open only after receiving both a state and local license, said Julie Postlethwait, a spokeswoman for the state's Marijuana Enforcement Division.

In Denver, 18 shops received state and local licenses in time to begin selling marijuana Jan. 1, according to the Department of Excise and Licenses. Five marijuana-infused product manufacturers and 27 growers also received licenses.

Colorado residents with a photo identification showing they are at least 21 may buy as much as one ounce of pot in a single transaction, while those from out of state can get a quarter ounce. Customers can't consume the product in public, including at the shops.

Colorado projects $578.1 million a year in combined wholesale and retail marijuana sales to yield $67 million in tax revenue, according to the Legislative Council of the Colorado General Assembly. Wholesale transactions taxed at 15 percent will finance school construction, while the retail levy of 10 percent will fund regulation of the industry.

At Colorado Cannabis Facility in Denver, co-owner Larry Nassau said he's charging $40 for an eighth of an ounce for recreational marijuana and $50 for an eighth of a higher quality, compared with $30 and $35 for the same amount of medical marijuana. Customers are willing to pay the elevated prices, he said.

“There's just this sense of euphoria among people,” Nassau, 61, said by telephone. “It seems like it doesn't matter as much as just taking part in this.”